China in Europe: September 2024

China Garners Criticism Over Russian Support: Although China news in Europe is typically dominated by economics, Beijing has taken an increasingly center-stage spot in European security headlines. Deputy Secretary of State Kurt Campbell announced in Brussels that China is directly supporting the war effort in Ukraine, a major redline that the United States and Europe have warned China would incur major consequences if crossed. Campbell’s announcement is a test for the transatlantic relationship, both in terms of unity on an approach to China and in how the United States and Europe will address the country if it becomes more blatantly confrontational and threatening. Outgoing NATO Secretary-General Jens Stoltenberg called on China to stop its support for the Russian war effort. 

European Defensive Moves in East Asia: In other defense news, an Italian carrier strike group was sent to the South China Sea, and Japan and the European Union (EU) announced new high-level security dialogue as calls to transform NATO into a global actor with a presence in the Indo-Pacific grow. The Arctic is also heating up as China, Russia, and NATO compete for ports and bases in the region. Also, the UK National Cyber Centre warned that a Chinese company with ties to the government has formed a botnet, a network of connected and infected devices that heighten the risk of cyberattacks. At the same time, China and the UK held consultations on arms control and nonproliferation in London. Germany also decided to sail two vessels through the Taiwan Strait for the first time in over two decades, which has infuriated China. 

Anti-subsidy Investigation: The EU delayed a major vote on the European Commission’s tariffs on Chinese battery electric vehicles (BEVs) until October 4. Ultimately, the European Commission did secure the necessary votes to pass its tariffs after concluding its subsidy investigation: ten states voted in favor, five against (including in Germany), and twelve abstained. However, the story is not over as both China and the EU have promised to continue dialogue for a negotiated solution. Although the vote was originally scheduled for September 25, the EU Commission had not released the findings of its investigation, a necessary step before the member states could vote. The bloc decided to keep the provisional tariffs the commission had levied earlier in 2024 in place for the next five (or more) years. To block the subsides, opponents needed to secure a simple majority. Even then, however, the tariffs would simply move to appeal. To block the tariffs in appeal, fifteen countries, representing 65 percent of the EU population, must vote against the tariffs. For context, the European Commission Trade Defense Instruments Committee has never lost an appeal. In the original vote, twelve states voted for tariffs, including France, Italy, and Spain; four voted against and eleven abstained, including Germany. As the final vote drew closer, however, tensions have risen and the division grew. 

China Tried Reconciliation: China tried to resolve its ongoing tariff dispute with the EU regarding their BEV exports on its own terms. Commerce Minister Wang Wentao, who promised to “negotiate until the last minute” spent much of the month in European capitals including Berlin, Brussels, and Rome. He had something of a mixed record: Berlin came out more aggressively against tariffs; EU Executive Vice President Valdis Dombrovskis in Brussels rejected China’s offer for price floors but agreed to “intensify negotiations” before a vote was made; but Italy flatly rejected Wang’s overtures, which almost certainly dooms China’s mission to negotiate a settlement. China tried to heighten its pressure on Italy by simultaneously promising BEV cooperation and threatening retaliation if Meloni failed to balk. China also announced, in a dual carrot-and-stick move, that it had decided not to implement cognac tariffs, but left the door open to revisit the decision in the future. It is worth noting that the decision did little to ease the pressure on France to back away from the tariffs, as hundreds of Cognac producers in France protested the tariff vote in September. Finally, the Chinese Ministry of Commerce warned Chinese firms not to export sensitive, advanced BEV technologies and to instead only export kits ready for basic assembly. Although the ministry classified Europe as a lower risk than other regions (such as Russia), the message could complicate efforts to circumvent the tariffs by building Chinese factories in Europe, a process called localization. That news comes as Chinese car manufacturer Chery is reportedly exploring options for building plants in Spain and the UK. Chery is not alone either, as other firms such a BYD have jumped in on the localization trend. China’s probe into the market practices of the EU dairy markets also elicited a sharp response, with the EU filing a complaint at the World Trade Organization.    

Spanish and German Lobbying: China’s largest tariff-vote win was Spain’s voting reversal. Originally supporting the tariffs, Spanish Prime Minister Pedro Sánchez of the Spanish Socialist Worker’s Party has become a vocal critic of the measures, urging the EU to reconsider and seek political resolution. His remarks came during a trip to China, which included a tour of a Shanghai battery plant. They also follow China’s opening of an investigation of EU pork subsidies, widely seen as retaliation for the BEV investigation. Spain exported 1.2 billion euros of pork to China last year—nearly half of Europe’s pork exports to China, and 20 percent of China’s total pork imports. 

Germany also became increasingly forceful in its efforts to block the tariffs. German Economy Minister Robert Habeck said that a trade war needs to be avoided, echoing German Chancellor Olaf Scholz’s line on the dispute, after meeting Wang earlier this month. The South China Morning Post reported that Berlin is explicitly lobbying other capitals to vote against the tariffs. In addition, pressure from the German car industry mounts; German car manufacturers have bet for years on the Chinese market and fear that the EU’s tariffs will incite a trade war that will hurt already-slowing profits. Several major groups announced a downward adjustment of earnings expectations, in large part because of increased competition from Chinese manufacturers and slowing demand. That adjustment has prompted certain businesses to shed some of their investment in China, including Mercedes, which was bought out by Chinese car maker BYD from their joint BEV factory. Indeed, the situation has become so bad that German giant Volkswagen is reportedly considering closing some German factories for the first time ever. Nonetheless, carmakers insist that because of those difficulties they cannot lose access to the Chinese market. Ultimately, Germany voted against tariffs, despite abstaining in the preliminary vote earlier this year.  

Draghi’s Bleak Blueprint: Former European Central Bank President Mario Draghi’s long-awaited report on European competitiveness came out in September. The extensive document details how to revive European competitiveness across governance, economics, and security for the future, and takes aim at China. Draghi himself called for a balanced approach of protecting EU industries from unfair Chinese practices, while continuing to trade clean tech with the gigantic market. His call for balance matched the statements of several outgoing and incoming EU commissioners including Commissioner for Economy Paolo Gentiloni and Commissioner-Designate for Competition Teresa Ribera. Unfortunately for Draghi, the report faces some large hurdles: Friedrich Merz, the leader of the CDU/CSU (Germany’s center-right opposition) and potential next chancellor, said he would “do everything [he] can” to kill the joint debt proposal in the report. Finance Minister Christian Lindner of the Free Democratic Party also came out against the key debt measures at the heart of the proposal. Habeck, however, strongly favored the report. 

In Other EU News: Ursula Von der Leyen announced her list of commissioners-designate, with many receiving mandates that directly addressed China. Her reorganization also creates complex overlapping reporting structures that strengthen her direct hand over policy, which most experts agree will result in a harsher European stance on China. The EU Chamber of Commerce also released a report detailing falling interest within the European business community in China’s market, as demand slows and reforms stutter. Yet, as the Global Times noted, trade between the two giants continues to strengthen and grow. Finally, Denmark has denied Chinese dissident Liu Dongling’s asylum application. Liu has long been a leading voice in the protest movement working to end China’s “Great Firewall,” and she has since fled to Sweden, where her future status remains uncertain.  

Labour’s China Policy Taking Shape: Unlike Canada, the United States, and the EU, the UK has taken no steps to address the BEV issue, raising the prospect of Britain becoming a major export destination for Chinese Cars, even as the prominent British think tank China Strategic Risks Institute called for banning Chinese smart vehicles from government use. Two Labour peers separately called for harsher sanctions regarding Chinese support for Russia and reconciliation with the People’s Republic of China (PRC). Labour’s muddled China policy was further highlighted in September, as Liam Byrne, chair of the Business Select Committee, called on the government to ban imports from the Chinese territory of Xinjiang and to investigate Shein’s listing on the London Stock Exchange. The UK further released a scathing report after six months of investigation into the state of affairs in Hong Kong and criticized the PRC for violating the terms of the 1997 handover agreement. The government of Hong Kong pulled no punches in their response. MI6, together with the CIA, called China the greatest threat since the Cold War, which was backed by a joint declaration from the two governments later in the month. Secretaries of State Antony Blinken and David Lammy met and discussed the importance of the Taiwan issue. In tourism news, Hong Kongers will now have to pay to enter the UK. The Universities of Oxford and Cambridge were also in the headlines in September. The outgoing chancellor of Oxford University, Lord Patten, warned against the influence of China in higher education, and Cambridge denied that it was dependent on China after Chinese Ambassador Zheng Zeguang’s visit elicited controversy. Furthermore, the UK announced that it was ending funding for Confucius Institutes across the country. The city of Jingdezhen, the ancient center of Chinese Porcelain, held a cultural event in London to promote tourism to the city. China has also called on the UK to reengage honestly, while the UK has called on China to reciprocate their openness to reengagement.